What happened on 24 Dec 2025

 Executive Summary

This document synthesizes critical developments across Pakistan's economy, global financial markets, and the technology sector as of late December 2025. Key takeaways include a significant overhaul of Pakistan's tax deduction framework for 2026, coupled with a highly aggressive enforcement drive by the Federal Board of Revenue (FBR). The country's export sector faces severe headwinds, evidenced by a nearly 50% plunge in rice exports and the implementation of stricter regulations for cotton shipments.

Globally, financial markets are experiencing a robust year-end "Santa Claus rally," with U.S. indices hitting record highs and Asian markets showing significant strength. Precious metals, particularly gold and silver, are surging to new peaks. The technology sector is marked by Pakistan's definitive plan for a 5G rollout in 2026 and major product announcements from global giants like Samsung, Xiaomi, and Oppo, focusing on AI integration and next-generation hardware. Other notable international events include Syria's plan to overhaul its currency and a temporary U.S. concession allowing India's Reliance to continue importing Russian oil.

I. Pakistan: Tax Policy and Enforcement Overhaul for 2026

The Federal Board of Revenue (FBR) is implementing comprehensive updates to the Income Tax Ordinance, 2001 for the tax year 2026, focusing on expanding the tax-deduction-at-source (TDS) regime. This is accompanied by a major enforcement campaign yielding significant revenue recoveries.

A. Comprehensive Tax Deduction Reforms

The FBR has clarified and updated rules across multiple sections of the Income Tax Ordinance to streamline and enforce TDS on a wide range of economic activities.

Section	Subject	Key Provisions and Changes for Tax Year 2026	Nature of Tax
154A	Export of Services	Authorized dealers must deduct tax upon realization of foreign exchange. Applies to IT/ITES (PSEB certified), technical services, royalties, and construction contracts abroad.	Final Tax, provided the exporter has filed all necessary tax returns. PSEB-certified IT exporters are exempt from these conditions. Exporters can opt-out.
154	Export of Goods	Tax is deducted at source by authorized dealers, banks, EPZ authorities, and customs.	Minimum Tax, forming part of the exporter's overall income tax calculation.
153	Payments for Goods, Services, Contracts	"Prescribed persons" (government, companies, etc.) must deduct tax on payments for goods (>Rs. 75,000/year), services (>Rs. 30,000/year), and contracts. Includes specific provisions for e-commerce intermediaries and courier services collecting Cash on Delivery (CoD).	Minimum Tax generally, but Adjustable for manufacturers selling their own goods and for public listed companies.
152	Payments to Non-Residents	TDS applies to a broad range of payments including royalties, technical fees, insurance premiums, advertisements, and capital gains on securities.	Final Tax for most specified subsections (e.g., contracts, insurance, capital gains), but can be Minimum Tax in other cases.
151	Profit on Debt	The paying entity (bank, government authority) must deduct tax on profits from deposits, savings certificates, and bonds.	Minimum Tax for individual recipients.
151A	Capital Gains on Debt Securities	The custodian or banking company must deduct tax on capital gains from the disposal of government and other debt securities held in Investor Portfolio Securities (IPS) accounts.	TDS is automatically collected at the source.

B. Aggressive Enforcement and Revenue Collection

The FBR is demonstrating a firm commitment to tax compliance through high-profile enforcement actions.

• Major Recovery: The Corporate Tax Office (CTO) Lahore recovered Rs. 2.646 billion (reported as Rs. 2.65 billion in one instance) from a single non-compliant taxpayer after completing an assessment proceeding.
• Increased Enforcement Yield: The FBR's enforcement measures recovered Rs. 874 billion in the fiscal year 2024-25, a substantial increase from Rs. 105 billion recovered in 2023-24.
• Future Targets: The FBR has set an enforcement recovery target of Rs. 389 billion for the fiscal year 2025-26.

II. Pakistan: Key Industrial and Economic Developments

Pakistan's key industries are navigating significant challenges related to exports, domestic logistics, and policy transparency, while new initiatives aim to boost competitiveness and reform state-owned enterprises.

A. Export Sector Under Pressure

• Rice Exports Plunge: Exports of rice plummeted by 49% during the first five months of FY26 (July-Nov 2025), falling to $769 million from $1.52 billion in the same period of the previous year.
  • Basmati Rice: Exports fell by 37.6% to $241 million.
  • Other Varieties: Exports plunged 53% to $528.3 million.
  • Causal Factors: Industry experts attribute the decline to higher domestic costs making Pakistani rice less competitive than Indian rice, flood-related production losses, and adverse policy changes, including the shift from the Final Tax Regime to the Normal Tax Regime and higher borrowing costs.
• Stricter Cotton Export Rules: The government has made a 1% security deposit with the State Bank of Pakistan (SBP) mandatory for all cotton exports.
  • This measure, amending the Export Policy Order, 2022, is designed to enforce contract compliance.
  • It shifts oversight from the Trade Development Authority of Pakistan (TDAP) directly to the SBP.
  • Exporters must ship the contracted quantity within 180 days of the foreign buyer opening an irrevocable letter of credit (LC), or the deposit will be forfeited.

B. Domestic Sector Challenges and Initiatives

• Freight Rate Hike: The Karachi Customs Agents Association (KCAA) raised an alarm over goods transporters more than doubling freight charges immediately following a week-long strike. Routes previously costing Rs. 20,000-30,000 surged to Rs. 50,000-60,000, severely increasing the cost of business.
• Wheat Subsidy Concerns: The Hyderabad Chamber of Small Traders and Small Industry (HCSTSI) has called for transparency in Sindh's wheat subsidy system, highlighting a discrepancy of approximately PKR 1,500 between the subsidized price of a 100-kg bag (PKR 8,000) and the price at which it is supplied to flour mills (PKR 9,500).
• Horticulture Modernization: The Pakistan Horticulture Development and Export Company (PHDEC) has launched a Food Safety Certification Project in Balochistan on an 80:20 cost-sharing basis. The project aims to help growers and exporters obtain internationally recognized certifications (Global GAP, HACCP, ISO 22000) to access high-end international markets. PHDEC is also establishing its first regional office in Quetta.

C. Infrastructure and SOE Reforms

• Pakistan and the Asian Development Bank (ADB) signed loan agreements totaling $730 million.
  • $330 million is allocated for the Second Power Transmission Strengthening Project.
  • $400 million is designated for the Accelerating State-Owned Enterprise (SOE) Transformation Programme.

III. Global Market Analysis: A Strong Year-End Rally

Global financial markets exhibited strong positive momentum in the final week of 2025, driven by gains in US and Asian equities and a powerful rally in precious metals.

A. Equity Markets Surge

• United States: The Dow Jones Industrial Average and S&P 500 closed at record highs on December 24, with major indices recording their fifth straight session of gains. This performance has spurred hopes of a "Santa Claus rally." The market appears to be pricing in approximately 50 basis points of Federal Reserve rate cuts in 2026.
• Asia: MSCI's broadest index of Asia-Pacific shares reached a six-week high.
  • Japan: The Topix index climbed to a record high, though the Nikkei later slipped due to a strengthening yen.
  • South Korea: The benchmark index rose, taking its annual gain to 72%, making it the world's best-performing major stock market in 2025.
  • China: The Shanghai Composite index recorded its longest winning streak since July, and the blue-chip CSI300 index is on pace for an 18% gain for the year.
• Europe: The pan-European STOXX 600 ended the holiday-shortened week near record highs, on track for its strongest annual performance since 2021.
• Gulf: Markets were subdued or eased, weighed down by soft oil prices and thin holiday trading volumes.

B. Commodity and Bond Market Dynamics

• Precious Metals: A "blistering rally" saw both spot silver and gold hit record highs. Gold surged over 71% in 2025, on pace for its strongest annual gain since 1979, while silver is up 158% for the year.
• Oil and LNG: Oil prices rose for a sixth consecutive session due to robust U.S. economic data and geopolitical risks in Venezuela and Nigeria. However, Brent and WTI crude are on track for their steepest annual decline since 2020. Asian spot LNG prices edged up on demand from South Korea.
• Bonds:
  • Japan: Super-long government bonds rose after a report indicated Japan will likely reduce issuance next fiscal year.
  • India: Government bonds saw their biggest single-session gains since May after the Reserve Bank of India announced a significant liquidity infusion of 2.90 trillion rupees.

IV. Technology and Innovation Landscape

Significant advancements in Pakistan's digital infrastructure, major product unveilings from global tech leaders, and ongoing geopolitical discussions defined the technology landscape.

A. Strategic Developments in Pakistan

• 5G Rollout Confirmed: Federal Minister for IT Shaza Fatima Khawaja announced that a 5G rollout is expected in five major cities (including Karachi, Lahore, and Islamabad) in the first quarter of the next financial year. A spectrum auction is scheduled for February 2026.
• AI Adoption Recognized: Pakistani company Impex Pakistan was named a Global Top 20 finalist at Alibaba.com's 2025 New Power Award in China. The company was recognized for its "AI Commander" approach, using AI-driven tools to transform its traditional Himalayan pink salt business into a global export operation.

B. Global Tech Product Launches and Previews

• Samsung:
  • Teased its "First Look 2026 AI Living Vision" event for CES 2026, signaling a deep focus on integrating AI across its product ecosystem.
  • Unveiled its 2026 Odyssey gaming monitor lineup, featuring the world's first 6K glasses-free 3D monitor (Odyssey 3D) and a model with an industry-first 1,040Hz refresh rate (Odyssey G6).
• Xiaomi: Confirmed its upcoming Xiaomi 17 Ultra by Leica smartphone will feature a physical, tactile zoom ring around the camera module, along with a 1-inch primary sensor and a periscope telephoto lens with continuous optical zoom.
• Oppo: Officially launched the Oppo Pad Air5 tablet in China, powered by the MediaTek Dimensity 7300-Ultra chipset and featuring a 12.1-inch 120Hz display.

C. Geopolitical Tech Issues

• TikTok Operations: China's Ministry of Commerce stated its hope that all parties will reach a balanced and lawful solution regarding TikTok's U.S. operations. A spokesperson emphasized that any resolution should align with Chinese laws, safeguard legitimate interests, and be based on mutual respect and equal consultation.

V. Other Key International Developments

• Syrian Currency Overhaul: Syria's central bank announced it will begin swapping old banknotes for new ones on January 1, 2026. This move, which may involve removing two zeros from the currency, aims to strengthen the Syrian pound and restore public confidence following the overthrow of Bashar al-Assad's regime one year prior.
• India-Russia Energy Trade: India's Reliance Industries Ltd has continued to receive oil cargoes from Russia's Rosneft after obtaining a one-month concession from Washington, which had imposed sanctions on the Russian producer. The U.S. had given companies until November 21 to wind down transactions.